TaxTMI 
TaxTMI 
2016 (11) TMI 255
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....ated the same as deferred revenue expenditure as per the accounting policy stated at 2 (g) - of the Significant Accounting Policies in Schedule 17 Annexed to the Annual Financial Statements i.e., Balance Sheet as on 31.03.2009, Income and Expenditure Account for the Year ended 31.03.2009 and Cash Flow Statement for the year ended 31.03.2009. Accordingly, assessee followed the policy of treating the same as deferred revenue expenditure by grouping the same under "Miscellaneous Expenditure (to the extent not written off or adjusted) in the Balance Sheet and followed the policy of writing off the same to the extent either Rs. 120 Lakhs or 30% of the Profit Before Interest and Tax whichever is less. Accordingly, the assessee charged Rs. 56,19,306 being 30% of the PBIT to the profit and loss account of the relevant Previous Year. The assessee in the computation of income added back the amount of Rs. 56,19,306 being the amount debited to P& L Account and claimed Rs. 1,20,00,000 as deduction which is 20% of the total amount of Rs. 6 Crore paid being 1/5th of expenditure. 2.1. Before the Assessing Officer, the assessee claimed that the same is a revenue expenditure and that the deferred r....
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....se (b) of Explanation- 3 to sub-section (1) of section 32 of Income Tax Act, 1961, accordingly depreciation ought to have been allowed under section 32(1)(ii) of the said Act. 3.1. Ground Nos. 4 and 5 are alternate grounds that the amount can be allowed as deferred revenue expenditure proportionately as treated by the assessee or even allowed as expenditure under section 37(1) in the year of acquisition of the client base. 4. Learned Counsel for the assessee reiterated the submissions made before the authorities and relied on the Coordinate Bench decision in the case of SKS Micro Finance Ltd., vs. DCIT, Circle-3(2), Hyderabad (2013) 145 ITD 111 (ITAT-HYD) wherein on similar facts the Coordinate Bench has allowed the claim of depreciation. He also relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. Smifs Securities Ltd., 348 ITR 302(SC) and also ITAT, Delhi Bench decision in the case of M/s. Cyber India Online Limited vs. ACIT, Circle-3(1), New Delhi in ITA.No.1299/Del./2010 dated 27.11.2013. He also relied on the decision of Hon'ble Delhi High Court in the case of CIT, Delhi- 1 vs. MIS Bharti Teletech Ltd., in ITA.No.496/2014 dated 15.04.2015 in support of....
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....used in all states and elsewhere in India and abroad for the micro finance program being presently executed by SWAWS. SCCI LTD shall be free to use these brand name and logo for their operations elsewhere in India or- the world at its discretion. 6. CONSIDERATION FOR TRANSFER, FEE, ROYALTY: 6.1. SWAWS shall be entitled to charge the following fee and consideration. 6.1.1. One time reimbursement of customer creation costs, for having identified, motivated, trained, credit checked and risk filtered, approximately 100,000 customers on December 31, 2007, since all of these customers are generating net positive revenue for SWAWS at present, aggregating to Rs. 40.00 Million at the rate of approximately Rs. 400 per customer. 6.1.1.1. This consideration shall become payable in cash to SWAWS in two or more instalments in whatever convenient lot so that the entire amount is paid on or before 31st March, 2008. 6.1.1.2. Any default in payments will attract an interest of 12% on overnight balances. 6.1.2. One time payment of Rs. 20.00 Million, towards the cost of Brand 'SWAWS', for its logo, copyrights and other intellectual property Rights associated with the same and....
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....ers on August 31, 2005, or at the cost of Rs. 350.50 per customer, since all of these customers are generating net positive revenue for SKS at present. (b) One time reimbursement of an amount of Rs. 8.25 million towards cost of internal controls systems, computer software and related procedure based recovery systems etc. (c) Towards corporate services including strategic planning, all technical matters of group formation, addressing recovery issues, identification of new markets, market surveys, change in the method and procedures of financial services, introduction of new products, impact assessment, avenues for negotiation of new loans from prospective funders, generation additional revenues through grants, fees etc, training of key human resources, establishing/upgrading the MIS and ongoing accounting, quality control and internal audit systems. (d) Rs. 3.32 MilIion towards furniture, computers and fixtures. In consideration of the SKS Company agreeing to pay the above amounts, SKS Society agrees to transfer the Portfolio to SKS Company. It is hereby agreed and acknowledged between the Parties that the transfer of the loans would require the consent of the lenders, P....
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....e business and commercial asset of SKS on payment of lumpsum consideration which included the cost of acquisition of the existing customer base of SKS Society. It is also a fact that, the customer base acquired by the assessee has provided an impetus to the business of the assessee as the customers acquired are with proven track record since they have already been trained, motivated, credit checked and risk filtered. They are source of assured economic benefit to the assessee and certainly are tools of the trade which facilitates the assessee to carry on the business smoothly and effectively. Therefore, by acquiring the customer base the assessee has acquired business and commercial rights of similar nature. The CIT(A) has rejected assessee' claim of intangible asset on the conclusion that it does not come within the terms of know-how, patent, copyright, trademark, licence or business and intangible asset referred to in Sec.32(1)(ii) will apply to these limited category of intangible assets and not to a wider category of intangible assets. The Hon'ble Delhi High Court in case of Areva T & D India Ltd. Vs. DCIT (supra) while interpreting the term "business or commercial rights of si....
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....s, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd. (2010) 327 ITR 323 (SC) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a "licence" or "akin to a licence" which is one of the items falling in section 32(1) (ii) of the Act. In view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that section." 12. The Hon'ble Supreme Court in case of CIT vs. Smifs Securities Limited (supra) while considering whether goodwill would fall under the expression "any other business or commercial right of similar nature" held that the principle of ejus....
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....ange has held that it does not constitute an intangible asset. However, this decision of the Hon'ble High Court has been reversed by the Hon'ble Supreme Court in Techno Shares and Stocks Ltd. Vs. CIT (327 ITR 323). 14. The learned departmental representative has relied upon a decision of Hon'ble Delhi High Court in case of Sharp Business Systems vs. CIT (ITA.No.492/Del/2012 dated 5-11-2012) wherein the Hon'ble Delhi High Court has held that depreciation cannot be allowed on non compete fee as it does not come within the meaning of intangible asset as provided u/s 32(1)(ii) of the Act. However, a reading of the aforesaid judgment would make it clear that the Hon'ble Delhi High court came to such a conclusion as it held that an agreement on non compete fee is purely personal. The Hon'ble High Court further held that the words similar or commercial rights have to necessarily result in an intangible asset against the entire world which can be asserted as such to qualify for depreciation u/s 32(1) (ii) of the Act. However, the facts in the present case are different. The MOU between the assessee and SKS Society cannot be said to be purely personal. On the other hand, the acquisition ....